Update; Affordable Housing

Government to Launch Mortgage Company to Deliver Low-Cost Houses to Kenyans.

The government launched a company whose mandate will be to
deliver President Kenyatta’s affordable housing project. Dubbed the Kenya Mortgage Refinancing Company (KMRC), the government-backed entity will advance cash to banks and Saccos for on-lending to Kenyan home buyers.
KMRC will have commercial banks, mortgage companies and the World Bank as its principal shareholders. Its partners include the National Treasury, seven commercial banks, World Bank and its subsidiary, International Finance Corporation (IFC) and mortgage
lender HF Group. KMRC will advance cash to commercial banks, Saccos and mortgage companies on a wholesale basis to enable them to give cheap loans to home buyers.
Housing Principal Secretary Charles Hinga explains that KMRF will operate as a private sector-driven company. Its main aim is to develop the primary and secondary mortgage markets through the provision of secure and long-term funding to the mortgage lenders. The government has set aside an initial Sh1.5 billion to establish the company and then open it up to investors who will pump in more funds. The company is expected to enable mortgage financiers to issue 50,000 home loans in five years. The State-backed refinancing company was launched by President Kenyatta as part of the government’s plan to deliver the affordable housing project.
Financial institutions receiving cheap loans from KMRC are expected to give mortgage loans at a single digit interest rate from the current market rate of about 13.5 percent. Kenyan low-income earners seeking to buy houses in Nairobi will qualify for loans of up to Sh4 million while those outside the capital will get up to Sh3 million. Interest rates will be below 10 percent.
“Since we are getting concessional loans, our proposal is that primary lenders should pass the benefits to the borrower by keeping interest
rates at single digit,” said KMRC interim CEO Johnstone Oltetia. “But our key focus is on tenure because it is what will eventually drive down the overall cost of a mortgage, the fact that more financial institutions will be offering long-tenure loans at fixed rates.”
The KMRC is expected to help increase the number of mortgages from the current 26,000 to more than 60,000 by the year 2022. “Once operational, KMRC will support a large number of credit-worthy potential borrowers who are not able to obtain loans at the moment,” said President Kenyatta during the launch of KMRC. “It will be expected to provide fixed-rate, long term low-interest funding; and help reverse low mortgage penetration in Kenya.” The secondary mortgage financier has several partners among them the National Treasury, seven commercial banks, World Bank and its subsidiary, International Finance Corporation (IFC) and mortgage lender HF Group. KMRC’s interim board members include Treasury Principal Secretary Kamau Thugge, Stima Sacco chairman Osman Khatolwa, Housing Finance Company Group CEO Robert Kibaara and KCB Group’s nominated member Samuel Makome. — JOHN WANJOHI (mwakilishi.com)